Why your credit score is so important
The McBreen Group's primary focus is to deliver valuable information to help consumers make the right financial decisions when it comes to managing their money and mortgage…
- 1. Joseph McBreen Senior Loan Officer The McBreen Group Phone: 312-429-0565 Fax 312-429-0575 email@example.com www.themcbreengroup.com Your Credit Score What It Means to You as a Prospective Home BuyerIntroductionWhy Your Credit Score is So ImportantThe subject of credit scoring has becomeThe credit scoring model seeks to quantify the likelihood of aan increasingly hot topic, and for good consumer to pay off debt without being more than 90 days late atreason. For many years, the general publicany time in the future. Credit scores have many different ranges,only associated the concept of credit however, the score that is used by 90% of lenders and creditors inscoring with the need to purchase this country is the FICO score, and the FICO score range is 300 tohigh-ticket items such as a new car or a850. Credit scores can range between a low score of 300 and ahome. Today, credit scoring goes much high score of 850. The higher the score, the better it is for thefurther. Your credit score can affect yourconsumer, because a high credit score translates into a lowability to get a good rate on commodities interest rate. This can save literally thousands of dollars insuch as car insurance, cell phones, orfinancing fees over the life of the loan.even determine whether or not you get thejob or promotion that you want and deserve. Indeed, the financial Only one out of 1,300 people in the United States have a creditsnapshot provided by the credit score has also become a gauge score above 800. These are people with a stellar credit rating thatfor many employers, especially those who seek to placeget the best interest rates. On the other hand, one out of everyemployees in a position of management or financial responsibility.eight prospective home buyers is faced with the possibility thatthey may not qualify for the home loan they want because theyThe History of Credit Scoring have a score falling between 500 and 600.The credit score system used today has evolved since the 1950s.It was originally designed to provide lenders with financial profileson consumers who wished to borrow money. The lenders biggestconcern was whether or not an individual had the ability to repay aloan, and establish what percentage of risk might be involved.Congress passed the Fair Credit Reporting Act in 1971 to establishguidelines for fair practices in regard to the use of credit scoring.This law was designed to promote accuracy in reporting andprotect the privacy of consumers. In light of the increased use ofcredit scoring and a growing fear of identity theft, recent legislationhas been passed to further protect Americans and improveconsumer awareness.The Fair and Accurate Credit Transactions Act of 2003 (sometimesThe Five Factors of Credit Scoringreferred to as The FACT ACT or FACTA) was signed by PresidentGeorge W. Bush on December 4, 2003. This amended the Fair Credit scores are comprised of five factors. Points are awarded forCredit Reporting Act, enabling each American to obtain one free each component, and a high score is most favorable. The factorscredit report every 12 months from each of the three main creditare listed below in order of importance.reporting agencies (CRAs); Equifax, Experian® and TransUnion®.Those bureaus have created a central web site,1. PAYMENT HISTORY - 35% IMPACTwww.annualcreditreport.com, to accommodate Americans who Paying debt on time and in full has the greatest positivewish to obtain copies of their credit report. Note: If you decide to impact on your credit score. Late payments, judgmentstake advantage of this program, please keep in mind that and charge-offs all have a negative impact. Delinquenciesannualcreditreport.com does not offer free credit scores with your that have occurred in the last two years carry more weightreports. However, you can purchase your score at the same time than older items.that you order your free report for around $7.95 per bureau. Tohave a complete picture of where you stand with your credit, it isalways recommended that you order your scores at the same time.